From striver alert to future cuts: five things to expect from the Autumn Statement

A few insights from Gavin Kelly to help you navigate Osborne's fiscal arithmetic.

In the Autumn Statement there will be a blizzard of facts, figures, assertions and counter-assertions. There have been a few helpful pointers on what lto ook out for (try this and this), and I’ve already given my tuppence worth on what may happen to the faltering fiscal rules. But here are a few further insights to bear in mind.

First, be on striver alert. Expect plenty of warm words about "do-ers and grafters" who get up and work hard on modest means. In a different part of the Chancellor’s speech there will be tough messages and measures for those working age families who receive tax credits and benefits. Not for the first or last time the impression will be given that these are two distinct groups inhabiting different moral and economic worlds. They aren’t. Three quarters of tax credits go to working households. If reports about capping tax credit increases at 1 per cent are correct then so-called strivers are about to be squeezed too. 

Second, there will be new news on wages – and the longevity of the squeeze. Buried in the OBR report there will new estimates for what is expected to happen to wages and inflation until 2018. In terms of the economics, and politics, of living standards from now until the election this is key data. Given that the OBR’s forecast for growth in 2013 is very likely to be marked down (from rosy 2 per cent figure it set in March) the assumption for earnings may well also fall. Also, for those who want to get inside the numbers, be warned that the figures the OBR uses tend to be a bit optimistic as they are based on the mean rather than typical (ie median) wage.

Third, watch out for childcare. Given the size of the cuts that are coming down the path you might not expect any new areas of spending. But if there is to be any (outside of new capital investment – or more accurately a slowing down of the rate of infrastructure cuts) then childcare may be a beneficiary. Measures to help with childcare costs would support employment, speak to concerns over the cost of living, and be a nod to the Coalition’s woes with some women voters. In terms of what might actually get announced there is likely to have been a lively internal debate. On the one hand, there are those who favour introducing tax-relief – a slightly saloon bar approach - which will inevitably favour the better off (and which has been skewered by my colleague James Plunkett). Against this are those who would like to build on the 15 hours of free guaranteed pre-school childcare. This latter approach would be a step in the right direction and do something to reduce the shocking disincentives to work that many second earners face in low and middle income families. That said, the government may want to hold any such announcement back to the New Year when its Childcare Commission reports.

Fourth, there is the widely anticipated raid on pension tax relief for the affluent. The briefings are that around £1-1.5bn might be raised by lowering the annual limit on pension contributions from £50k to £30k. If so, be ready for a bit of a storm from the well-organised pensions lobby. But bear in mind that tax-relief is highly regressive and very expensive. It is indeed remarkable that the support for higher rate tax payers has been so protected given some of the cuts being made – some of the claims about these measure hammering "middle-earners" are very overdone.

Even so, there are better ways of cutting tax-relief for the affluent than restricting the annual limit: the lifetime allowance for tax privileged pension contributions should be cut instead. Bringing it down from £1.5m to £1m would raise up to £1.5bn (to put this perspective note that the typical size of annuity purchased is £25k). It’s also the case that those who say that this salami slicing of pension tax relief is destabilising for savers have a point: the government should work out once and for all how much it wants to raise from pension tax relief in this Parliament and then draw a line. And when it does this, it should bear in mind that it still needs to find the billions to pay for the final increase in the personal tax allowance to £10k before 2015.

Finally, care needs to be taken in adding up the scale of the future cuts. The briefing by the IFS on Thursday lunchtime will provide the definitive view on this. But if a figure is revealed for new cuts that need to be made in 2017/18 (because the structural deficit gets pushed back by another year) then bear in mind that this will be on top of a pile of other cuts – roughly £23bn - that have already been pencilled in for 2015/16 and 2016/2017 but are yet to be allocated. Osborne is accumulating an ever larger mountain of fiscal misery to be dished out between departments and welfare spending. For a guide to this unpleasant fiscal arithmetic you won’t do better than reading this from the IPPR and this from the SMF.

But also bear in mind, that if the OBR decided at some future date to change its assumptions about the amount of spare capacity in the economy, and therefore the size of the structural deficit, then all of these numbers would be greatly affected. In which case there would be probably be a need for another Autumn Statement.

 

George Osborne. Photograph: Getty Images

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

Getty
Show Hide image

The 8 bits of good news about integration buried in the Casey Review

It's not all Trojan Horses.

The government-commissioned Casey Review on integration tackles serious subjects, from honour crimes to discrimination and hate crime.

It outlines how deprivation, discrimination, segregated schools and unenlightened traditions can drag certain British-Pakistani and Bangladeshi communities into isolation. 

It shines a light on nepotistic local politics, which only entrench religious and gender segregation. It also charts the hurdles faced by ethnic minorities from school, to university and the workplace. There is no doubt it makes uncomfortable reading. 

But at a time when the negative consequences of immigration are dominating headlines, it’s easy to miss some of the more optimistic trends the Casey Report uncovered:

1. You can always have more friends

For all the talk of segregation, 82 per cent of us socialise at least once a month with people from a different ethnic and religious background, according to the Citizenship Survey 2010-11.

More than half of first generation migrants had friends of a different ethnicity. As for their children, nearly three quarters were friends with people from other ethnic backgrounds. Younger people with higher levels of education and better wages are most likely to have close inter-ethnic friendships. 

Brits from Black African and Mixed ethnic backgrounds are the most sociable it seems, as they are most likely to have friends from outside their neighbourhood. White British and Irish ethnic groups, on the other hand, are least likely to have ethnically-mixed social networks. 

Moving away from home seemed to be a key factor in diversifying your friendship group –18 to 34s were the most ethnically integrated age group. 

2. Integrated schools help

The Casey Review tells the story of how schools can distort a community’s view of the world, such as the mostly Asian high school where pupils thought 90 per cent of Brits were Asian (the actual figure is 7 per cent), and the Trojan Horse affair, where hardline Muslims were accused of dominating the curriculum of a state school (the exact facts have never come to light). 

But on the other hand, schools that are integrated, can change a whole community’s perspective. A study in Oldham found that when two schools were merged to create a more balanced pupil population between White Brits and British Asians, the level of anxiety both groups felt diminished. 

3. And kids are doing better at school

The Casey Report notes: “In recent years there has been a general improvement in educational attainment in schools, with a narrowing in the gap between White pupils and pupils from Pakistani, Bangladeshi and African/Caribbean/Black ethnic backgrounds.”

A number of ethnic minority groups, including pupils of Chinese, Indian, Irish and Bangladeshi ethnicity, outperformed White British pupils (but not White Gypsy and Roma pupils, who had the lowest attainment levels of all). 

4. Most people feel part of a community

Despite the talk of a divided society, in 2015-16, 89 per cent of people thought their community was cohesive, according to the Community Life Survey, and agreed their local area is a place where people from different backgrounds get on well together. This feeling of cohesiveness is actually higher than in 2003, at the height of New Labour multiculturalism, when the figure stood at 80 per cent. 

5. Muslims are sticklers for the law

Much of the Casey Report dealt with the divisions between British Muslims and other communities, on matters of culture, religious extremism and equality. It also looked at the Islamophobia and discrimination Muslims face in the UK. 

However, while the cultural and ideological clashes may be real, a ComRes/BBC poll in 2015 found that 95 per cent of British Muslims felt loyal to Britain and 93 per cent believed Muslims in Britain should always obey British laws. 

6. Employment prospects are improving

The Casey Review rightly notes the discrimination faced by jobseekers, such as study which found CVs with white-sounding names had a better rate of reply. Brits from Black, Pakistani or Bangladeshi backgrounds are more likely to be unemployed than Whites. 

However, the employment gap between ethnic minorities and White Brits has narrowed over the last decade, from 15.6 per cent in 2004 to 12.8 per cent in 2015. 

In October 2015, public and private sector employers responsible for employing 1.8m people signed a pledge to operate recruitment on a “name blind” basis. 

7. Pretty much everyone understand this

According to the 2011 census, 91.6 per cent of adults in England and Wales had English as their main language. And 98.2 per cent of them could speak English. 

Since 2008-2009, most non-European migrants coming to the UK have to meet English requirements as part of the immigration process. 

8. Oh, and there’s a British Muslim Mayor ready to tackle integration head on

The Casey Review criticised British Asian community leaders in northern towns for preventing proper discussion of equality and in some cases preventing women from launching rival bids for a council seat.

But it also quoted Sadiq Khan, the Mayor of London, and a British Muslim. Khan criticised religious families that force children to adopt a certain lifestyle, and he concluded:

"There is no other city in the world where I would want to raise my daughters than London.

"They have rights, they have protection, the right to wear what they like, think what they like, to meet who they like, to study what they like, more than they would in any other country.”

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.